US Daily Cash Deficit 8/28/2013

The US Daily Cash Deficit for 8/28/2013 was $10.6B bringing the August 2013 deficit through 28 days to $133B with two business days remaining. $12B of Social Security payments went out today…the last payment of the month, bringing August 2013 and 2014 as close to in sync as they have been all month. Revenues are back down YOY $2B under last year’s pace, but there is a good chance they will catch back up tomorrow as a few $B of excise taxes are likely to trickle in. Outlays are also down $10B, resulting in the deficit being down $9B(rounded) vs last year. Without a doubt…improvement is a good thing…we’ll take it…but this kind of meager improvement is substantially less than we have become accustomed to seeing.

08-28-2013 USDD

So…with two days to go…expect a small deficit for Thursday, followed by a large Friday deficit…likely in the $30-$40B range as September payments get pulled into August by the timing of the weekend and the Labor Day Holiday. Thanks to the holiday, we won’t have our final August numbers until next Tuesday 9/3, but I don’t mind waiting.

43% Pay No Income Taxes!! Well…not exactly…also-Fun with Math

They pop up every couple of months…today by Jeanne Sahadi  at money.com. Now quite honestly, this one…if you bother to read it is better than most(but I’ll pick on it anyway), but the headline still blares out….”43% Pay No Income Taxes“. That’s terrible you probably think….nearly half of the population is getting a free ride. Those lazy slacking  (and literally) poor SOB’s…. Except… there’s just one little thing…these numbers always exclude employment taxes…for social security and medicare. As I detailed a few months back in Social Security: Crappy Deal…Getting Worse …Fica is a bona fide income tax of 15.3% of all income earned up to like $110k or so. So…that guy making $50k may not pay a lot of “income tax” as defined by the study, but he does pay $7500 a year for something that looks like an income tax, walks like an income tax, and smells like an income tax.

So let’s just cut the crap. FICA is an income tax…I laid out my hypothesis in Proof (well…circumstantial evidence) Social Security Implemented As Stealth Income Tax. Anyway…the bottom line is that these articles get me riled up because they are generally intellectually dishonest and just try to rile up tension between different income groups… If you want to play those kind of games fine…but do it for real and include the 15% FICA as income tax. Of course, nobody would click on that headline…”8.25% pay no income taxes”.. but I digress 🙂 So let’s skip over that and look at some math.

Lets take a typical family of 5 with an annual income of $50k. We know they pay $7500 of FICA taxes a year…but what about “income taxes.”

Right off the top…take off $12,200 for the standard deduction and another $3900/person for exemptions ($19,500) and you get down to $18300 of taxable income. The 10% tax bracket runs to $17,900, so if this was it…they’d be on the hook for about $1,800. But…take out some for medical, maybe some modest 401k and HSA contributions, maybe some business losses on a not so popular blog…getting down to $10k of taxable income could happen without too much effort, so $1k of income taxes.

But wait…they have 3 kids….and are almost certainly eligible for a 1k per kid credit…so they are eligible for a $2k refund (1k -3k=-2k) as it stands. Depending on the circumstances…they could probably push their income up to $65k or so before they technically started paying taxes, and this is a pretty cookie cutter scenario. No judgement here…but that’s the math….it’s pretty damn simple. So odds are, a good chunk of families making under $65k per year technically don’t pay “income taxes”. All I’m saying is that I’m not amazed, and this shouldn’t be a story at all….if these writers were capable of basic math, they would see that it actually makes a whole lot of sense. In fact, I’m surprised it’s not quite a bit higher…. Clearly…you don’t need to be a tax cheat to avoid “income taxes”…just the ability to do 3rd grade math.  Oh well…I’m sure our journalist’s sentence diagramming skills are impeccable.

US Daily Cash Deficit 8/27/2013

The Us Daily Cash Deficit for 8/27/2013 was $5.9B bringing the August deficit through 27 days to $122B with three business days remaining. Revenues have finally pulled even to August 2012’s pace at $179B…likely on track to edge out August 2012’s $204B of revenues by a few billion or so.

08-27-2013 USDD

With three days left…August is looking like a big disappointment…with flat revenues, and adjusted for timing, more or less flat cost….where we are really looking for +10% revenues and 1-2% reduction in outlays to match earlier month’s performances. This would make two in a row…though we should probably average them together….I’ll do that once the finals are in. Obviously…if August ends like that…it won’t be a good thing, but September Revenues is what I am most interested in. Quarter ends are always stronger in revenues….and subject to more uncertainty. If we see solid YOY revenue gains across the board…it will be good news…or at least more of what we’ve seen over most of 2013. If…however, revenues disappoint for the third month in a row, it will be a pretty good sign that trouble’s a brewin…and the pony ride that the first half of 2013 has resembled is just about over.

Syria: I am a 91%er

So the news of the day is…Obama has decided to bomb Syria. Pat Buchannan frames the issue quite well in his post today. I like this quote:

“The only thing we learn from history is that we do not learn from history.”

Holy hell…what is Obama thinking….I won’t make an essay of this…others far better informed than me have already done this, but for what it’s worth… President Obama…I am a US citizen…and I stand with the other 91% of my countrymen who do not approve of this war you seem determined to drag us into. I truly hope that for once, Republicans and Democrats can unite against this terrible mistake before it is made. For what it’s worth…email your congressmen and demand they take action.

US Daily Cash Deficit 8/26/2013 – With Debt Limit Countdown Calculations!!

The US Daily Cash Surplus for 8/26/2013 was $2.7B bringing the August deficit through 26 days to $116B with four business days remaining. My original deficit estimate was $155B, and we are certainly within striking distance. We need $39B to get there. Tuesday-Thursday will likely average around $5B per day….meaning a 24B deficit on Friday would get us there. For reference…the deficit on Friday 8/31/2012 was $64B…but it included $23B of Social Security payments slated for 9/3/2012…Labor Day. This year, Labor Day is on 9/2, so the 9/3 payments of about $25B should go out in September…rather than being drawn into August like in 2012. So…absent surprises, the August Deficit is looking to end around $155B to $170B or so.

08-24-2013 USDD

Cash in hand is now down to $42B…less than the expected cash deficit over the next four days…..which of course means Lew will need to use his “extraordinary measures” (EM) to create some cash out of thin air. While there are multiple elements to EM, the accounting is straight forward. They simply pretend that some of the existing debt does not exist…which lowers the official debt outstanding…allowing them to issue more debt in exchange for cash….and thus keep funding the government despite the debt limit. Yes it’s shady…it basically changes the debt limit to… debt limit +$300B or so. Last time we had an extended debt limit fight like this was between May 2011 and August 2011. The day after the debt limit was raised…debt outstanding increased $239B…as the Treasury made the necessary journal entries to make all the outstanding “EM” show back up on the balance sheet.

The latest from Lew is that the “for real” debt limit will be hit in Mid October. So…lets back into that. We started playing this little game back on 5/20 with a cash balance of $34B. For the remainder of May, we ran a $58B deficit, followed by a $116B surplus in June thanks mostly to our buddies at Fannie Mae coming through on our payday loan. then came July with a $90B deficit, and through 26 days of August, we have another $116B on the books. Add it all up, and absent EM, we would have a cash balance of about $-114B instead of the +42B we actually have, indicating EM to date of about $156B…

I recall reading somewhere that extraordinary measures gave them $260B of headroom….indicating that they have about $100B left. Lets say we run another $50B over the next 4 days…we end August with 50B of EM in the tank, and $42B of cash (or some combination of the two)…$92B. After a weak start, September should recover as revenues start pouring in mid-month as quarter ends usually do…My preliminary estimate for September is a $60B surplus…pushing the $92B cushion up to $152B by the end of September. From there…I have the October Deficit at $97B and the November Deficit at $130B. So with this set of facts and assumptions…I would put it at early to mid November versus Lew’s mid October. That said…any errors in these values would push the date forward or backward. For example…if the true amount of EM left is only $50B, and my October deficit forecast is $20B low…I could see a mid October date, and honestly, I have no reason to think my simple model is in any way superior than Lew…who likely has far superior data and a crack team of government analysts updating the forecast hourly.

In the end, I suppose it really doesn’t matter what the date is. The big picture is this… We have $17T of debt, and while the 2013 deficit will show a material improvement over 2012 (down from $1.1T to ~$750B)…this is likely a bottom…with steady increases from here on out.

Interesting fact…the distribution of the deficit over the fiscal year has become extremely asymmetrical…which is what has enabled the Treasury to draw this debt limit battle out all summer and apparently into fall. Using actuals for FY 2013+ estimates for August and September, it looks to me like a full 85% of the deficit will have been incurred in the first half…October 2012-March 2013. We are still looking at huge deficits…in the $700-800B range, but they are not evenly distributed…making it easy to skate by on EM during the second half of the fiscal year. So…when you hear all those amazing stories about the debt outstanding being the same for 100+ days…when you look at the detail…it’s really not that amazing. Shady…yes, but completely explainable 🙂